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BAE abandons £28bn EADS merger plan

Defence giant BAE Systems has confirmed that plans for a £28 billion merger with French rival EADS have been scrapped.

The deal would have created a defence titan with combined sales of £60 billion and more than 220,000 staff, with around 52,000 employees in the UK.

BAE said it had become clear that the interests of government stakeholders - including those in France and Germany - could not be reconciled with each other or with the company's objectives.

Unions believed the link-up would have created a strong company to guarantee jobs in the long term.

BAE chief executive Ian King said the British business remained "strong and financially robust", and added: "We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders."

Under Takeover Panel rules, BAE and Airbus parent EADS had until 5pm to announce the terms of the merger, scrap the proposal or ask for an extension to finalise their plans. It is believed Germany dealt the latest blow to the troubled deal, with reports suggesting that German Chancellor Angela Merkel opposed the merger.

France has a direct stake in EADS while German influence is held through a 22% stake owned by car maker and industrial group Daimler. Reports suggest that Germany was insisting on a 9% stake in the enlarged group to match France's holding. But British politicians voiced concerns over the level of Franco-German ownership when the UK would have no direct stake.

In its statement, BAE said it had had a great deal of "constructive and professional engagement" with respective governments but could not reach an agreement. EADS chief executive Tom Enders said it was a "pity" the companies did not succeed but added: "I'm glad we tried".

Unite urged the UK Government to strengthen its "golden share" in BAE Systems by taking an active stake in the company to safeguard British jobs and boost British manufacturing. The union, which represents more than 30,000 skilled workers across the two companies, had been pressing for guarantees over jobs if the merger had gone ahead.

A UK Government spokesman said: "The two companies will remain as successful independent companies, each with a significant presence in the UK. The Government has always been clear that it could see the commercial logic of this deal but that it would only ever work if it met the interests of all the parties involved. Today the two companies decided that a merger cannot be concluded on this basis."